CVS Health Corp (NYSE:CVS) stock rose 3.50% (As on February 13, 11:20:52 AM UTC-4, Source: Google Finance) after the company’s fourth-quarter results signaled improved performance from the company whose insurance and drugstore units have been struggling. Lower-than-expected costs in the Aetna insurance unit helped drive CVS’ profit above estimates, as the company spent a smaller percentage of premium revenue on medical expenses than analysts expected. The company had also already accounted for some anticipated fourth-quarter losses in the third quarter. CVS Health exited the fourth quarter of 2024 with cash and cash equivalents of $8.59 billion compared with $8.20 billion at the end of 2023. The long-term debt was $60.53 billion compared with $58.64 billion at the end of 2023. The cumulative net cash provided by operating activities at the end of the fourth quarter of 2024 was $9.11 billion compared with $13.43 billion in the year-ago period.
Further, CVS is trying to turn around its drugstore chain and insurance business, where profit has been hit by underpricing of plans and cuts to quality ratings that help determine payments from U.S. health programs. In the insurance unit, CVS spent 94.8% of premium revenue on medical care in the quarter, less than analysts expected. Investors prefer a lower number. However, CVS said in a separate filing that high use of medical services will continue to pressure the business.
Moreover, Health Services revenues were down 4.3% year over year to $47.02 billion in the reported quarter. This downside was due to the previously announced loss of a large client and continued pharmacy client price improvements. Total pharmacy claims processed declined 16.9% on a 30-day equivalent basis compared with the prior year. Revenues in the Pharmacy & Consumer Wellness segment were up 7.5% year over year to $33.51 billion. Within the Health Care Benefits segment, the company registered revenues worth $32.96 billion in the fourth quarter, up 23.3% year over year. This upside was driven by growth in the Medicare and individual exchange product lines.
CVS in the fourth quarter of FY 24 has reported the adjusted earnings per share of $1.19, beating the analysts’ estimates for the adjusted earnings per share of 92 cents. The company had reported the adjusted revenue growth of 4.2 percent to $97.71 billion in the fourth quarter of FY 24, beating the analysts’ estimates for revenue by 0.6%.
Adjusted earnings for 2025 will be $5.75 to $6 a share, while the average estimate of analysts surveyed by Bloomberg was $6.